Ministry of Finance Tax Bulletin

Ministry of Finance Tax Bulletin

ISSUED: July 2010 Revised: July 2020

Bulletin MFT-CT 003 gov.bc.ca/salestaxes

Coloured Fuels and Other Substances

Motor Fuel Tax Act and Carbon Tax Act

Latest Revision: The revision bar ( ) identifies changes to the previous version of this bulletin dated October 2018. For a summary of the changes, see Latest Revision at the end of this document.

This bulletin provides information to help sellers and purchasers of coloured fuel, marine diesel, locomotive fuel, and other substances, such as heating oil and non-motor fuel oil, understand how the Motor Fuel Tax Act and Carbon Tax Act apply to their operations.

Table of Contents

Overview ............................................................................................ 2 Definitions ......................................................................................... 2 Sellers

Authorization to Colour Fuel ......................................................4 Responsibilities of Businesses Authorized to Colour Fuel .....5 Authorization to Sell Coloured Fuel ..........................................6 Re-labelling Fuel............................................................................7 Responsibilities of Fuel Sellers ....................................................7 Refunds for Businesses...............................................................11 End Purchasers Authorized Uses of Coloured Fuel...........................................12 Unauthorized Use of Coloured Fuel ........................................16 Heating Oil and Non-Motor Fuel Oil.......................................17 Marine Diesel and Locomotive Fuel ........................................17 Refunds of Motor Fuel Tax and Carbon Tax on Coloured Fuel ............................................................................18

PO Box 9447 Stn Prov Govt Victoria BC V8W 9V7

Overview

Motor Fuel Tax

Coloured fuel (also called dyed or marked fuel) is generally gasoline or diesel that is mixed with a specific dye to distinguish it from clear fuel. Coloured fuel is taxed at a lower motor fuel tax rate than clear fuel if certain conditions are met (see Certification from Purchasers of Coloured Fuel below) and may only be used for authorized purposes, (see Authorized Uses of Coloured Fuel below).

While motor fuel tax does not apply to heating oil or non-motor fuel oil, the special rules regarding the colouring, labelling, purchasing, selling and use of these substances are set out under the Motor Fuel Tax Act and are discussed in this bulletin.

To colour fuel, heating oil or non-motor fuel oil you must receive authorization from us and follow the requirements for storing dye, colouring fuel and reporting. You must also receive authorization from us to sell coloured fuel.

Note: You may lose your authority to colour fuel and sell coloured fuel if you do not follow the procedures outlined in this bulletin. The unauthorized use of coloured fuel may result in fines and penalties.

To report the unauthorized use or sale of coloured fuel, please call 1-877-977-0858.

Carbon Tax

Carbon tax rates are based on the type of fuel (e.g. gasoline or diesel) and the tax rates do not change if the fuel is clear or coloured (e.g. clear diesel and coloured diesel are taxed at the same rate).

For more information, see Bulletin MFT-CT 005, Tax Rates on Fuels.

Definitions

A commercial motor vehicle is a vehicle with a permanently attached truck or delivery body, or a combination of vehicles, such as a tractor-trailer unit. There are certain requirements for commercial motor vehicles used inter-provincially or internationally. For more information, see Bulletin MFT-CT 008, International Fuel Tax Agreement and Motive Fuel User Permits.

Coloured fuel includes coloured gasoline, coloured diesel, coloured marine diesel and coloured locomotive fuel. It also includes methanol based fuel of which at least 85% is methanol and ethanol based fuel of which at least 85% is ethanol--when used for a purpose for which coloured fuel is authorized to be used.

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A coloured fuel seller is a person authorized to sell coloured fuel, including coloured marine diesel, coloured locomotive fuel, heating oil and coloured non-motor fuel oil.

A farmer is a person who operates a farm on land classified as a farm under the Assessment Act of BC.

Heating oil is a coloured light fuel oil (diesel fuel) marketed or sold for use in a furnace, boiler or open flame burner.

A highway is any public road, street, lane or right of way (road allowance) intended for or used by the general public for the passage of vehicles in BC, but does not include industrial roads (e.g. logging access roads on Crown land).

A highway project area is a work area that is under construction as a highway or a highway under reconstruction or repair by any government, including federal, provincial or municipal governments, or that is designated for these purposes in a call for tender or contract. It does not include ongoing maintenance activities, such as grading, snow ploughing or other maintenance work done on a highway outside a highway project area.

A licensed motor vehicle is a vehicle registered for use on a public road. Generally, licensing includes a licence plate for the vehicle, a validation decal on the plate, the Owner's Certificate of Insurance, and a vehicle licence or temporary operating permit. A motor vehicle is considered unlicensed if it does not meet any of the above requirements.

Note: An Off-Road Vehicle (ORV) with an ORV number plate is considered to be a licensed motor vehicle if it has a validation decal on the plate.

Locomotive fuel is fuel (except propane and, effective January 1, 2018, natural gas) for use in an internal combustion engine in any rolling stock or other vehicle when run on rails. Locomotive fuel used only in a locomotive can be clear or coloured . Locomotive fuel used in a vehicle when run on rails must be clear.

Marine diesel fuel is diesel fuel used in a ship as fuel for an internal combustion engine. Marine diesel fuel can be clear or coloured .

Minerals are metal ore and natural substances that can be mined and that: occur in fragments or particles lying on, above or next to its bedrock

source (commonly described as talus), are in the place or position where they were originally formed or deposited, or

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 are loose, fragmentary or broken rock or float that, through decomposition or erosion of rock, are found in wash, loose earth, gravel or sand.

Note: For motor fuel tax purposes, building and construction stone, marble, shale, clay, sand and gravel are not minerals.

Non-motor fuel oil is a clear or coloured light fuel oil (diesel fuel) marketed or sold for a use other than for use in an internal combustion engine, furnace, boiler or open flame burner. Examples of non-motor fuel oil include light fuel oil sold for use as solvents, protective coatings or explosives.

A purchaser is a person who buys or receives delivery of fuel in BC for their own use. The use of the fuel may occur within or outside of BC. For clarity, this bulletin will refer to purchasers as end purchasers.

A retail dealer is a person who sells fuel to a purchaser in BC.

Sellers

Authorization to Colour Fuel

You must receive authorization from us to colour fuel. Your authorization to colour fuel is specific to fuel that you own and also allows you to colour heating oil and non-motor fuel oil for use other than in internal combustion engines.

You apply for authorization by contacting us either by fax or email at:

Motor Fuel and Carbon Tax Section Fax: 250-387-5882 Email: FuelTax@gov.bc.ca

If you have received authorization from us to colour fuel, you may only colour fuel: at a refinery in BC, at a bulk storage plant (includes cardlocks and terminals) owned or leased by you, by using a dye injector mounted on a truck, or onboard an authorized vessel owned or leased by you.

If you are not approved to colour fuel, we will send you a letter explaining why your application was refused and how to appeal the decision if you disagree. If your application is refused, you must not colour fuel. However, you may still receive authorization to sell coloured fuel in BC. For more information, see Authorization to Sell Coloured Fuel below.

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We conduct regular on-site inspections. If you are not properly handling and colouring the fuel, or appropriately storing the dye or dye concentrate, we may suspend or cancel your authorization to colour fuel. This may result in fines and penalties.

Responsibilities of Businesses Authorized to Colour Fuel

Ordering and Storing Dye Concentrate If you are a business authorized to colour fuel in BC, you must only use dye concentrate supplied by us. You order dye from us by completing and submitting a Requisition for Dye (FIN 452).

You need to keep dye and pre-mixed dye solution securely stored at your authorized location at all times. All pumps or containers you use to store, colour, transport or dispense coloured fuel must be clearly labelled as marked or coloured fuel.

If you transport fuel for sale or delivery, you cannot also transport or carry dye or pre-mixed solution unless it is in an authorized vessel you own or lease, or in a truck-mounted dye injector.

Dye concentrate is considered a hazardous substance; it is combustible and should be stored indoors and away from extreme cold, moisture and all sources of ignition. Care must also be taken to avoid contamination once dye containers are opened--especially from moisture . Containers should be reclosed tightly if not used in their entirely. For 3.5 kg cans, any unused dye concentrate should be stored in a re-sealable container.

Pre-mixed dye solution should also be stored in closed containers away from moisture and all sources of ignition. Extreme cold does not affect the pre-mix solution; however, it should be used as soon as possible after it is prepared.

Colouring the Fuel Coloured fuel is dyed at a concentration of 14 parts per million (i.e. 14 parts of dye per million parts of fuel). If you are colouring fuel, you must create a pre-mix solution of the specific dye provided to you by us and a liquid petroleum product before the dye can be used to colour fuel. You can make this solution by mixing 3.5 kg of dye with 200 litres of a liquid petroleum product.

For best results, follow these steps to ensure the dye is well-mixed. 1. Mix the fuel in a 203.5 litre drum mounted on its side with a tap attached 2. Fill the drum one quarter full of liquid petroleum 3. Add the dye 4. Add more liquid petroleum until the drum is full

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When you mix clear fuel with a pre-mix dye solution, you must ensure you mix them in the correct quantities. To colour gas or diesel fuel, the ratio is one part pre-mix dye solution to 1,250 parts of fuel. To determine the quantity of pre-mix in millilitres to add to the clear fuel, multiply the number of litres by 0.8. For example, if you have 500 litres of clear fuel, you multiply the litres by 0.8, which equals 400 ml of pre-mix dye (500 x 0.8 = 400).

If automatic measuring devices are not available, you need to use measuring cups accurately calibrated in millilitres. For best results, add the pre-mix dye solution to a partially filled mixing tank. This method ensures the dye is well-mixed.

Note: Coloured fuel may darken with time due to the normal oxidation of the fuel.

Reporting Dye Used and on Hand If you are authorized to colour fuel, you use the Dye Stock Report to indicate the amount of dye in storage and the amount of fuel coloured during the reporting month. You can complete and submit this report online using eTaxBC or by mail, courier or in person using the Dye Stock Report (FIN 476) available on our website. The report must be received by us on or before the 15th day of the month following the period you are reporting.

Authorization to Sell Coloured Fuel

You must apply to, and receive authorization from, us to sell coloured fuel, coloured marine diesel and coloured locomotive fuel in BC. An authorization to sell coloured fuel also allows you to sell heating oil and coloured non-motor fuel oil for use other than in internal combustion engines.

If you sell heating oil, it must be coloured before you sell it. If you sell marine diesel, locomotive fuel, or non-motor fuel oil, you are not required to colour it before you sell it. However, at or before the time you sell non-motor fuel oil (whether coloured or not) to a person for the person's own use, you must obtain from the purchaser a Certificate of Exemption ? Substances Not Sold for Use in Internal Combustion Engine (FIN 480). You must keep this completed certificate in your records.

To apply for authorization to sell coloured fuel, you must complete and submit an Application for Authorization to Sell Coloured Fuel (FIN 461), including a signed copy of the agreement attached to the application that contains the terms and conditions of your authorization to sell coloured fuel.

You must apply for authorization for each physical location (e.g. a cardlock, gas station or marina fuel dock) and you cannot delegate or transfer authorizations to a new

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location. You must complete a new application prior to selling coloured fuel from any new physical location.

If your application is approved, the director or delegate will sign the agreement and send you a copy, along with labels to be affixed to all pumps that dispense coloured fuel.

If you are not approved as a coloured fuel seller, we will send you a letter explaining why your application was refused and how to appeal the decision if you disagree. If your application is refused, you must not sell coloured fuel in BC.

Note: Wilfully colouring fuel or selling coloured fuel without authorization is an offence under the Motor Fuel Tax Act and conviction may result in a fine of up to $10,000 and imprisonment for up to two years.

Re-labelling Fuel

Relabelling fuel is purchasing one type of fuel and then selling it as another type of fuel, or as another substance (i.e. not for use in an internal combustion engine) at either the same or at a lower tax rate. Re-labelling fuel is different from colouring fuel (e.g. dyeing clear diesel to create coloured diesel).

The authority of fuel sellers to re-label varies based on the type of business, the initial fuel type or substance, and the final fuel type or substance sold. For more information, see Bulletin MFT-CT 001, Fuel Sellers.

Responsibilities of Fuel Sellers

If you sell coloured fuel, marine diesel (clear or coloured) or locomotive fuel (clear or coloured), you must follow the conditions outlined below.

Coloured Fuel Pump Labels You must attach our coloured fuel labels that outline authorized uses of coloured fuel in a clearly visible location on all coloured fuel pumps. Examples of pump labels are on our website.

Certification Required from Purchasers of Coloured Fuel, Marine Diesel and Locomotive Fuel In most cases, you must obtain a completed and signed copy of the Coloured Fuel Certification (Includes Marine Diesel and Locomotive Fuel) (FIN 430) before you sell

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coloured fuel, marine diesel (clear or coloured) or locomotive fuel (clear or coloured), to an end purchaser for their own use: through a cardlock, including at a terminal rack or bulk plant, or in an amount greater than 45 litres.

The certification must be completed by the end purchaser to certify they will use the fuel only for an authorized use. You must keep the certification on file. You may make additional sales of the fuel based on the certification you have on file for a specific purchaser if: the information on the certification is current, and you can link each sale to the certification you have on file (e.g. by an account, name

or reference number).

You do not need to obtain this certification in the following situations You transfer the coloured fuel directly into the supply tank of a ship or a boat that is

on or in the water. You transfer marine diesel directly into the supply tank of a ship that is on or in the

water. You sell the fuel to a farmer that has provided you a completed and signed

Certificate of Exemption ? Farmer (FIN 458), or a copy of their valid Farmer Identity Card issued by the BC Agricultural Council. You sell fuel to an eligible First Nations purchaser or band on First Nations land (see Bulletin MFT-CT 002, Sales to First Nations and the Fuel Tax Exemption Program). You sell locomotive fuel to an end purchaser with a Registered Consumer Certificate for locomotive fuel. Note: Authorized coloured fuel sellers may sell coloured diesel fuel to a registered consumer as locomotive fuel if the invoice shows the coloured diesel is being sold for use in a locomotive (e.g. coloured diesel sold as locomotive fuel). You sell clear or coloured non-motor fuel oil. In this case, you must obtain from the end purchaser a completed and signed Certificate of Exemption - Substances Sold for Use Other than in Internal Combustion Engines (FIN 480). You sell coloured diesel, coloured gas, coloured marine diesel, coloured locomotive or coloured non-motor fuel oil, to a customer for resale purposes if that customer is also an authorized coloured fuel seller. A current listing of all businesses authorized to sell coloured fuel is available on our website.

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